Wpg june 2014 presentation (2)
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WASHINGTON PRIME GROUP MAY 2014
Washington Prime Group
June 2014 Presentation
JUNE 2014 WASHINGTON PRIME GROUP
JUNE 2014 WASHINGTON PRIME GROUP
Disclaimer
Statements in this presentation that are not historical may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such factors include, but are not limited to: uncertainties as to the timing of the spin-off and whether it will be completed, the possibility that various closing conditions for the spin-off may not be satisfied or waived, the expected tax treatment of the spin-off, the possibility that third party consents required to transfer certain properties in the spin-off will not be received, the impact of the spin-off on the businesses of the Company and the spin-off company, the Company's ability to meet debt service requirements, the availability and terms of financing, changes in the Company's credit rating, changes in market rates of interest and foreign exchange rates for foreign currencies, changes in the value of investments in foreign entities, the ability to hedge interest rate risk, risks associated with the acquisition, development, expansion, leasing and management of properties, general risks related to retail real estate, the liquidity of real estate investments, environmental liabilities, international, national, regional and local economic climates, changes in market rental rates, trends in the retail industry, relationships with anchor tenants, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks relating to joint venture properties, costs of common area maintenance, competitive market forces, risks related to international activities, insurance costs and coverage, terrorist activities, changes in economic and market conditions and maintenance of the Company’s status as a real estate investment trust. The Company discusses these and other risks and uncertainties under the heading “Risk Factors” in WPG’s filings with the SEC. The Company undertakes no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.
The information in this presentation has been included in good faith but is for general informational purposes only. All reasonable care has been taken to ensure that the information contained herein is not untrue or misleading. It should not be relied on for any specific purpose and no representation or warranty is given regarding its accuracy or completeness. Neither the Company, its shareholders, its officers or employees nor any other person shall be liable for any loss, damage or expense arising out of any access to or use of this presentation. Neither the presentation nor any discussions based on or in connection with it will impose any obligation on the Company or its affiliates with respect to a potential transaction or transactions. Information may be accurate only as of March 31, 2014.
This investor presentation includes forward-looking statements regarding estimated non-GAAP measures of initial year net operating income, or NOI, for WPG based upon the assets currently expected to be included in WPG. While these forward-looking figures are only estimates (including that they are subject to the factors noted above under “Forward-Looking Statements”), WPG believes that NOI is helpful to investors because they are widely recognized measures of the performance of real estate investment trusts and provide a relevant basis for comparison among REITs. Our estimation of these non‐GAAP measures with respect to WPG may not be the same as similar measures would be reported by other REITs. These non‐GAAP financial measures should not be considered as alternatives to net income as a measure of operating performance or to cash flows computed in accordance with GAAP as a measure of liquidity, nor are they indicative of cash flows from operating and financial activities. More information is available at www.washingtonprime.com.
2
WASHINGTON PRIME GROUP 3
Introduction
Washington Prime is a unique new retail REIT, spun from its Simon Property
Group roots. WPG combines a national, very profitable real estate portfolio
with an investment grade balance sheet as well as a proven and aggressive
management team and board, to grow in the fragmented U.S. community-vital
shopping center sector. WPG is neither a mall company nor a strip center
company and will leverage its expertise across the entire shopping center
space including community center, lifestyle center and mall-format properties.
We are a "franchise value" shopping center platform poised to grow.
JUNE 2014
WASHINGTON PRIME GROUP 4
The Company
Portfolio: 98 property diversified, stable cash flow national shopping center portfolio
Financial strength: Sector leading balance sheet with an investment grade rating (S&P: BBB
(Stable) / Moody’s: Baa2 (Stable) / Fitch: BBB (Stable))
Growth strategies:
— Internal growth through rent and occupancy gains
— Redevelopment of existing properties
— New ground-up development
— Acquisitions building on WPG’s national platform for locally important and productive retail
assets
Management: Long and successful track-record
SPG relationship: Ongoing relationship with the leadership and management of the Simon
Property Group
Attractive dividend: Expected to be at least $1.00 per WPG share annually
Washington Prime is a newly formed company which was spun off from Simon Property Group effective May 28, 2014
JUNE 2014
WASHINGTON PRIME GROUP 5
Overview
$100 million of identified opportunities
Proven track record of successful new developments
Opportunity enhanced by limited new supply
$200 million identified redevelopment pipeline
Additions of anchors Additions of other
mixed-use components
Specialty store expansions
Rigorous asset management
Innovative tenanting approaches
Strategic capital allocation
Internal Growth Redevelopment of
Existing Assets New Ground-Up
Development
Strong, investment grade balance sheet supports pursuit of attractive growth opportunities
Highly fragmented ownership in the local shopping center universe
Extensive transaction experience
Attractive low cost of capital
Opportunistic Acquisitions
Use our financial strength, portfolio stability and management acumen to deliver attractive total returns to shareholders
JUNE 2014
WASHINGTON PRIME GROUP 6
The Portfolio Shopping centers well-diversified by size and geography
FL18.8%
TX14.3%
IL10.0%
OH8.3%
IN6.1%
VA5.2%
KS4.1%
CO3.7%
TN3.4%
IA2.8%
Other23.1%
Portfolio Highlights
NOI Composition by Region2 Size Diversity1 Geographic Diversity of Sq. Ft.
Performance Snapshot
>500K SF 50 Assets (51%)200-500K SF
29 Assets (30%)
<200K SF 19 Assets (19%)
Florida19%
Texas14%
Midwest22%
Other45%
Total
2013 NOI (at share) $418mm
2013 Comparable NOI Growth (∆ from 2012) 2.9%
December 31, 2013 Occupancy 92.8%
Change from December 31, 2012 90 bps
Footprints ranging from 100K – 1.2 million sq. ft.
Presence in 23 states
No property accounts for >3% of total annual base minimum rental revenue
Assets generally sized to market demand
Note: Data is as of December 31, 2013 unless otherwise stated. See Appendix for a reconciliation of net income to NOI. 1. Based on percentage of total square feet. 2. Based on WPG’s share of NOI for year ended December 31, 2013.
JUNE 2014
WASHINGTON PRIME GROUP 7
Diversified Tenant Base No tenant accounts for more than 2.5% of total annual minimum base rental revenues
Top Inline Store Tenants1 Top Anchors1
% of Total % of Total % of Total % of Total
Portfolio Base Portfolio Base
Tenant Stores SF (000s) Sq. Ft. Min. Rent2 Tenant Stores SF (000s) Sq. Ft. Min. Rent
2
99 474 0.9% 2.5% 16 702 1.3% 1.6%
106 431 0.8% 2.4% 37 4,752 9.0% 1.3%
Ascena Retail Group Inc. 89 454 0.9% 1.7% 14 1,216 2.3% 1.3%
Sterling Jewelers, Inc. 56 95 0.2% 1.7% 15 479 0.9% 1.0%
80 73 0.1% 1.5% 7 418 0.8% 1.0%
Luxottica Group SPA 78 210 0.4% 1.4% 12 368 0.7% 0.9%
93 134 0.3% 1.2% 10 860 1.6% 0.8%
40 221 0.4% 1.2% 8 406 0.8% 0.8%
The Finish Line, Inc. 38 215 0.4% 1.1% 43 6,221 11.8% 0.7%
27 359 0.7% 1.0% 13 1,727 3.3% 0.0%
Total 706 2,667 5.1% 15.7% Total 175 17,149 32.5% 9.4%
1. Sorted by percentage of total base minimum rent. 2. Total base minimum rent represents 2013 combined base rental revenues.
JUNE 2014
WASHINGTON PRIME GROUP 8
Stable Operating Platform
Note: Data is as of December 31, 2013 for all open air center square footage and mall small shop square footage unless otherwise stated.
$18.65
$18.81 $18.86
2011 2012 2013
• Approximately 1,500 new and renewed leases
• Over 4.6 million square feet
• New leasing activity is at rates above portfolio average rent
Increasing Occupancy Strong New Leasing Results
Stable Rent per Square Foot Significant Leasing Activity (2012-2013)
91.4%
91.9%
92.8%
2011 2012 2013
$17.79
$27.64
$19.41 $21.06
Initial Base Minimum Rent PSF Tenant Allowance PSF
2012 2013
JUNE 2014
WASHINGTON PRIME GROUP 9
Well-Staggered Lease Expiration Schedules
Lease Expiration Schedules1
Inli
ne
Sto
res
and
Fr
ee
stan
din
g A
nch
or
Ten
ants
9.4%
11.5% 10.9%
8.5%6.9%
4.9%
MTM / 2014 2015 2016 2017 2018 2019
1.1%2.6% 2.9%
1.9%3.1%
1.7%
MTM / 2014 2015 2016 2017 2018 2019
Wtd. Avg. Base Rent PSF of All Expiring Leases1,2
$17.593 $16.40 $15.00 $15.23 $15.36 $14.50
1. Includes all leased space. Based on percentage of gross annual rental revenue. Gross annual rental revenue represents 2013 consolidated and joint venture combined base rental revenue for the portfolio. Excludes specialty leasing agreements with terms in excess of 12 months.
2. Based on base minimum rent per square foot as of December 31, 2013. 3. Reflects average base minimum rent for both month-to-month leases and leases expiring in 2014, weighted by square feet.
JUNE 2014
WASHINGTON PRIME GROUP 10
Florida Portfolio Highlights
• % Total 2013 NOI (at share): 18.7%
• 2013 NOI growth: 3.0%
• Occupancy (as of 12/31/13): 91.3%
Geographic Footprint Key Statistics
Sample Properties
Boynton Beach Mall
Edison Mall
Gulf View Square
Melbourne Square
Westland Park Plaza
Gaitway Plaza
Port Charlotte Town Center
Seminole Town Center
Waterford Lakes Town Center
Royal Eagle Plaza
University Town Plaza
West Town Corners
Open Air Centers Malls
Paddock Mall
Highland Lakes Center
Orange Park Mall
Edison Mall
1,053K SF 94.2% leased
3.0% of Total 2013 NOI
Waterford Lakes
994K SF 99.0% leased
3.4% of Total 2013 NOI
Properties are well positioned to benefit from population growth and the ongoing recovery of the Florida housing market and economy
JUNE 2014
• % Total 2013 NOI (at share): 16.3%
• 2013 NOI growth: 5.6%
• Occupancy (as of 12/31/13): 93.7%
WASHINGTON PRIME GROUP 11
Texas Portfolio Highlights
Geographic Footprint Key Statistics
Sample Properties
Portfolio has significant exposure to desirable Austin market and benefits from an overall robust Texas economy
Open Air Centers Malls
Richardson Square Irving Mall
Shops @ Northeast Mall
Longview Mall Sunland Park Mall
Gateway Centers Lakeline Plaza & Village
Shops @ Arbor Walk
Wolf Ranch
Rolling Oaks Mall
Palms Crossing (incl Phase II land) Valle Vista Mall
Arboretum
Gateway Centers
512K SF 95.0% leased
1.7% of Total 2013 NOI
Sunland Park Mall
922K SF 96.4% leased
1.6% of Total 2013 NOI
JUNE 2014
WASHINGTON PRIME GROUP 12
Midwest Portfolio Highlights Significant, stable cash flow generated from key Midwest markets
OHIO
Sample Properties
Great Lakes Mall
Lima Mall
Richmond Town Square
Southern Park Mall
Lima Center
ILLINOIS INDIANA
Lincolnwood Town Center
Northwoods Shopping Center
River Oaks Center
Bloomingdale Court
Countryside Plaza
Forest Plaza Lake Plaza
Lake View Plaza
Lincoln Crossing
Matteson Plaza
White Oaks Plaza & Convention Center
Muncie Mall
Markland Mall
Clay Terrace
Greenwood Plus Keystone Shoppes
Markland Plaza Muncie Plaza
New Castle Plaza
Northwood Plaza
Tippecanoe Plaza
University Center
Village Park Plaza Washington Plaza
Key Statistics
Open Air Centers Malls
Lincolnwood Town Center
421K SF 94.0% leased
1.6% of Total 2013 NOI
Northwoods Shopping Center
693K SF 96.7% leased
1.9% of Total 2013 NOI
Muncie Mall
635K SF 99.5% leased
1.3% of Total 2013 NOI
Great Lakes Mall
1,232K SF 91.5% leased
1.9% of Total 2013 NOI
• % Total 2013 NOI (at share): 22.0%
• 2013 NOI growth: 1.3%
• Occupancy (as of 12/31/13): 95.5%
JUNE 2014
WASHINGTON PRIME GROUP 13
Proven Management
• Current SPG Mall team will continue to lease and manage mall format assets, subject to direction from WPG CEO, Mark Ordan
• Existing SPG Community / Lifestyle Center Team (now a part of WPG), led by Myles Minton, will continue to lease and manage open air assets
• “Back office” functions, leasing, marketing, development and analysis provided by in-place SPG team through two year property management and transition service agreements
• Executive support and oversight from board members including SPG CEO, David Simon, and SPG President, Rick Sokolov
• Independent board members with deep backgrounds in real estate, investing, technology, accounting and financial controls and governance
JUNE 2014
WASHINGTON PRIME GROUP 14
Beneficial Ongoing Relationship with SPG
• Services provided include IT, accounts payable, payroll, other financial functions, select engineering support and other administrative services
• Charges anticipated to be breakeven to WPG
• Two year term
Transition Services
Agreement
• SPG will manage, lease, maintain and operate our enclosed malls under the direction of our executive management team
• We will pay annual property management fees to SPG ranging from 2.5 to 4.0% of base minimum and percentage rents
• SPG will also be paid fees for its leasing and development services at each of these enclosed malls
• Initial two year term with automatic one year renewals unless terminated by either party
Property Management Agreements
We will benefit from SPG’s property management, leasing and development functions and the efficiency and continuity arising from SPG continuing to provide administrative functions
JUNE 2014
WASHINGTON PRIME GROUP 15
Dedicated Management Team
• 20+ years of Corporate Financial Management • Former CAO and CFO of Sunrise Senior Living, helped lead turnaround • Former VP Accounting / Finance, The Mills Corporation and JER
Mark Ordan Chief Executive Officer
Marc Richards Chief Financial Officer
Myles Minton Chief Operating Officer
• President of Simon Property Group’s Community / Lifestyle Centers division • Former development VP for The Cambridge Company Development Corp.
• Senior VP, Capital Markets Group / Legal at Simon Property Group • Former Real Estate Attorney at Morgan Stanley Mortgage Capital
Robert Demchak General Counsel
• 25 years of senior banking and capital markets experience • Senior leadership roles at Simon Property Group and The Mills Corporation • Former VP Commercial Real Estate at SunTrust Bank
Michael Gaffney Senior VP, Head of
Capital Markets
• CEO & Board Member for 25 years of private and public retail and real estate companies • Led turnaround and sale of Sunrise Senior Living and The Mills Corporation, both
generating outsized shareholder returns • Former Chairman of Federal Realty; led management restructure • Founder and Former CEO of Fresh Fields; sold to Whole Foods (NASDAQ: WFM)
External recruits and former SPG employees provide both new perspectives and continuity
JUNE 2014
WASHINGTON PRIME GROUP 16
Strong Corporate Governance
• No staggered board (directors elected annually)
• Independent lead director
• Fully independent audit, compensation and governance & nominating committee
• No shareholder rights plan
Name Position Age Experience
Richard Sokolov Chairman 64 Director, President and COO of SPG since 1996
Mark Ordan CEO & Director 54 Former CEO of Sunrise Senior Living and The Mills Corporation
David Simon Director 52 Director of SPG since 1993, CEO since 1995 and Chairman since 2007
Louis Conforti Independent Director 49 Senior Managing Director of Balyasny Asset Management and Principal of Colony Capital
Robert Laikin Independent Director 50 Founder, Chairman and CEO of BrightPoint, Inc
Jacquelyn Soffer Independent Director 48 Principal for Turnberry Associates
Marvin White Independent Director 52 System VP and CFO of St. Vincent Hospital in Indianapolis
Board of Directors
A focus on shareholder value through an experienced and aligned board, shareholder-friendly governance provisions and a continued relationship with SPG
JUNE 2014
WASHINGTON PRIME GROUP 17
Value-Add Redevelopment Capabilities
$31.6mm $30.6mm
$73.6mm
$44.3mm
2011 2012 2013 2014 / 2015 Approved Planned
Development Activity 1
Redevelopment Activity – Investment at Share Recently Added or Expanded Anchor Tenants
Substantial investment has been made in WPG’s assets to attract and expand key anchor tenants
A pipeline of approximately $200 million of future redevelopment projects has been identified
1. Based on amounts approved as of December 31, 2013.
JUNE 2014
WASHINGTON PRIME GROUP 18
Redevelopment Case Study: University Town Plaza
• $28 million invested
• Enclosed mall space demolished, property converted into a community shopping center
• Maintained existing anchors while expanding tenant base with small shops, restaurants and the following additional anchors:
• Yield: 9.1%
SPG TO PROVIDE PICTURE
Before
After
Reconfiguring an existing enclosed mall to an open air shopping center
Complementary retail assets enable us to employ a broad array of leasing, management and development strategies to make each property as productive as possible
JUNE 2014
WASHINGTON PRIME GROUP 19
Substantial Ground-Up New Development Capabilities
• Experienced team with proven track record of successful ground-up developments
— Top four development executives have an average of 24 years’ experience
• 35 of our assets were developed from the ground up by WPG team
• We see opportunities for focused new development projects to satisfy demand from existing and prospective tenants seeking to open new stores or test new store formats
• Already identified $100 million pipeline of ground-up development projects
— Fairfield Town Center (Houston, TX)
— Palms Crossing Phase II (McAllen, TX)
Select Initial Assets Developed by WPG
Waterford Lakes Orlando, FL
Year Built: 1999 949,933 sq. ft.
ROI: 14.9%
Clay Terrace Carmel, IN
Year Built: 2004 576,787 sq. ft.
ROI: 10.5%
Shops at Arbor Walk Austin, TX
Year Built: 2006 458,467 sq. ft.
ROI: 11.1%
Wolf Ranch Georgetown, TX Year Built: 2005 627,804 sq. ft.
ROI: 8.3%
Note: Data is as of December 31, 2013 unless otherwise stated.
JUNE 2014
WASHINGTON PRIME GROUP 20
Limited New Supply Environment
2.8% 2.5%
1.1%
0.4% 0.3% 0.2% 0.2%
2007 2008 2009 2010 2011 2012 2013
1.6%
1.9%
0.9%
0.2% 0.2% 0.1%
0.2%
2007 2008 2009 2010 2011 2012 2013
New Community Center Supply1
New Mall Supply1
Source: ICSC / CoStar. 1. Based on year-over-year GLA growth.
New construction in the retail real estate industry is at a 30-year cyclical low
JUNE 2014
WASHINGTON PRIME GROUP 21
Significant Acquisition Opportunities
• Key acquisition investment criteria:
— Attractive “going-in” cap rate
— Near-term re-tenanting opportunities
— Expansion potential
— Above average growth prospects
• Fragmented ownership of shopping centers offers significant acquisition opportunities for WPG’s accomplished and dedicated management team
• Ability to acquire malls and community centers given existing diverse portfolio and management’s complementary skills
• WPG’s strong balance sheet enhances acquisition prospects
• WPG has the ability to offer an attractive equity currency to sellers seeking tax-deferral and/or other benefits
Selected Acquisitions by WPG Team
Arboretum Austin, TX
Year Acquired: 1998 194,972 sq. ft.
ROI: 10.3%
Mesa Mall Grand Junction, CO Year Acquired: 1998
880,469 sq. ft. ROI: 9.3%
Charlottesville Fashion Square Charlottesville, VA
Year Acquired: 1997 576,748 sq. ft.
ROI: 9.3%
Denver West Denver, CO
Year Acquired: 2007 310,911 sq. ft.
ROI: 11.7%
Gateway Centers Austin, TX
Year Acquired: 2004 512,414 sq. ft.
ROI: 6.2%
Note: Data is as of December 31, 2013 unless otherwise stated.
JUNE 2014
WASHINGTON PRIME GROUP 22
Strong, Investment Grade Balance Sheet
1. Revolving credit facility and/or term loan can be increased by up to $400 million (for a maximum of $1.8 billion in total) via the exercise of the accordion feature.
Strong, investment grade ratings
— S&P: BBB (Stable)
— Moody’s: Baa2 (Stable)
— Fitch: BBB (Stable)
Low leverage
— Net Debt / TTM NOI of 4.7x
— Fixed Charge Coverage of 3.8x
Access to multiple sources of capital
Strong and immediate liquidity to fund growth opportunities
— $900 million revolving credit facility ($797 million current availability)1
Primarily fixed-rate debt
Limited number of joint ventures
— Enhances portfolio control and flexibility
JUNE 2014
WASHINGTON PRIME GROUP 23
Strong, Investment Grade Balance Sheet
Unsecured
Term Loan25%
Secured
Mortgage Debt
70%
Unsecured Revolving
Credit Facility5%
Opening Balance Sheet1
Debt Maturity Schedule1
27 55
823
61
8
103
500
$64 $88
$293
$40 $4
$658
$831
2014 2015 2016 2017 2018 2019 Thereafter
Consolidated Mortgage Debt (at share) Unconsolidated Mortgage Debt (at share) Revolving Credit Facility Term Loan
Total: $1,978mm
Note: $ in millions. Assumes extension options on revolving credit facility and term loan are exercised. 1. As of December 31, 2013, pro forma for borrowings and refinancings subsequent to December 31, 2013.
Well-staggered profile with limited near
term maturities
Large, diverse pool of unencumbered assets
provides financial flexibility
— 59 assets (60% of total)
— 29.9mm sq. ft. (56% of total)
— $234mm of NOI (56% of total)
JUNE 2014
WASHINGTON PRIME GROUP 24
Balance Sheet Positioned for Growth
25%
78%
73%
68%
61% 58% 58% 57%
49%
44%
WPG BRX KIM RSE CBL DDR PEI REG WRI GRT
4.7x
9.0x
7.9x 7.8x
7.3x 7.1x 6.9x
6.5x 6.1x
5.8x
WPG RSE GRT DDR CBL REG BRX PEI WRI KIM
40%
68% 67%
63%
60%
55% 54%
51% 49%
46%
WPG RSE REG CBL BRX KIM GRT DDR PEI WRI
Net Debt / TTM NOI¹ Debt / Total Undepreciated Assets2 Percentage of Total Debt Maturing Prior to December 31, 2018
Low-leveraged balance sheet positions the company to capitalize on growth opportunities
Source: Company filings as of December 31, 2013. Note: Assumes all debt extension options are exercised. Debt balances include pro rata share of joint venture debt. WPG data is pro forma for borrowings and refinancings subsequent to
December 31, 2013. 1. TTM NOI is calculated for the twelve months ending December 31, 2013. 2. Total undepreciated assets calculated as the sum of total assets and accumulated depreciation.
Stronger balance sheet than peers is a distinct competitive advantage
JUNE 2014
WASHINGTON PRIME GROUP MAY 2014
Appendix
WASHINGTON PRIME GROUP JUNE 2014
WASHINGTON PRIME GROUP 26
Reconciliation of Net Operating Income (“NOI”)
($ in 000s)
Three Months Ended March 31, Year Ended December 31,
Reconciliation of net income to NOI: 2014 2013 2013 2012
Consolidated net income $41,502 $55,853 $187,334 $156,390
Depreciation and amortization of consolidated and unconsolidated entities 49,846 49,053 197,905 203,165
Interest expense of consolidated and unconsolidated entities 17,468 17,189 69,380 72,630
Income, other taxes and other 2,754 5,019 14,221 23,194
Less: Gain on sale of interests in properties (219) (14,801) (14,640) (4,124)
Total NOI of our portfolio $111,351 $112,313 $454,200 $451,255
Less: Joint venture partners' share of NOI (8,194) (9,843) (36,079) (40,347)
Our share of NOI $103,157 $102,470 $418,121 $410,908
Increase in our share of NOI from prior period 0.7% 1.8%
Total NOI of our portfolio $454,200 $451,255
NOI from non-comparable properties 5,469 15,223
Total NOI of comparable properties $448,731 $436,032
Increase in NOI of comparable properties 2.9%
JUNE 2014